Vanguard offers long-, inter- and short-term municipal bond funds. Specific funds are for state-issued bonds that include California, Massachusetts and New York. The state municipal funds provide relief from both federal and state taxes for individuals residing in those states. Vanguard also offers a high-yield municipal bond fund and an index tracking bond fund, according to the company website.
For a minimum investment of $3,000, Vanguard offers the California Long-Term Tax-Exempt Fund. With an average duration of five to six years, the fund invests in high quality municipal bonds across the yield curve. The fund provides a higher level of current income than shorter term funds, but with less price fluctuations, indicates Vanguard.
Income from the Vanguard High-Yield Tax-Exempt Fund is only exempt from federal taxes. It provides a higher yield because investments include low credit quality bonds. Besides municipal bonds, the fund includes other kinds of investments, such as future contracts and default swaps, notes Vanguard.
The tax-exempt index fund provides broad exposure to municipal bonds of all maturities. It follows an indexing strategy and tracks the S&P National AMT-Free Municipal Bond Index, states Vanguard. At least 80 percent of the assets in the fund are invested in bonds from the target index.